U.S. Job Growth Slows as Unemployment Edges Up: Implications for Fed Policy

June saw U.S. job growth slowing, with the unemployment rate rising to 4.1%. This may help the Federal Reserve manage inflation without triggering a recession. The Labor Department reported an addition of 206,000 jobs last month. Wage growth also moderated, supporting the Fed's inflation targets.

June saw a deceleration in U.S. job growth, yet it remained strong with the unemployment rate rising to 4.1%. The Labor Department's Bureau of Labor Statistics reported a gain of 206,000 jobs in June, while May data was revised down to 218,000 jobs from an initially reported 272,000.

Average hourly earnings increased by 0.3% in June, following a 0.4% rise in May. Over the past year, wages have grown by 3.9%, marking the smallest gain since June 2021 and aligning with the Federal Reserve's 2% inflation target. The unemployment rate rose to 4.1% in June from 4.0% in May.

This moderation in wage growth, combined with a slowdown in price increases in May, indicates a return to disinflationary trends, enhancing the Fed's confidence in its inflation outlook. The central bank has raised interest rates by 525 basis points since 2022 to combat inflation and may start easing rates as early as September.

(Disclaimer: With inputs from agencies.)